Chinese Local Government Behavior Research In The Perspective Of Regional Financial Security

With the fast development of economic globalization, finance is increasingly more important in modern economy. The security of financial system becomes an important factor in the orderly and healthy development of the market economy. No matter the Asian financial crisis in1997or the global financial crisis in2008made us feel the vulnerability of the financial system. To face up to the financial crisis, governments unanimously rescued the market and tried their best to defuse the crisis and reduce losses. After this effort, situation had been improved and some economic indicators gradually stabilized. Therefore, when market fails, it’s necessary and feasible for government to intervene in the economy. But we still have to think about the role government plays before the crisis. Just like some economists criticize, in fact government is the instigator of financial crisis.China is in the transition period of the planned economy to the market economy system, the system is not sound and the strong intervention from government towards financial system contributes to the stable development of China’s financial markets theoretically. But if this intervention is beyond the reasonable scope and effects the normal operation of financial system, it may effect the financial security. Similarly, the local government as an independent stakeholder, the rationality of its behavior relates with the regional financial security issues.This article uses the external theory and the theory of public goods to analyze the relation between local government behavior and local financial security. It indicates that local financial security has a feature of public goods and must be provided by local government, but the negative externalities of local government behavior would lead to regional financial risk. Meanwhile, after the comparative analysis of the two cases-the Closure of the Hainan Development Bank and the set up of Maintenance mechanisms of financial security by Lingxian government, it shows the reasons why China’s local government effects regional financial security, including the fuzzy government functions, decentralization, the unsound legal system and GDP-cored performance evaluation system. In view of these above reasons, this article indicates that we can use inherent elimination act of the negative externalities to solve the externalities of local government behavior and proposes the transformation of government functions, improvement of the financial management system,, improvement of the relevant legal system and establishment of the financial security zone and so on as main methods to specify the local government behavior and enhance regional financial security.